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Issue Report

Collection of full-length papers and in-depth analysis of economic and management issues.

China's Cross-Strait Relationship and the Formation of a Chinese Economic Community  in Asia

China's Cross-Strait Relationship and the Formation of a Chinese Economic Community in Asia

PARK Bun-Soon

Aug. 1, 2008

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Originally released in July, 2008

Ma Ying-Jeou, of Taiwan’s Nationalist Party, or “Kuomintang (KMT),” won a landslide victory in the presidential election on March 22, largely on promises to revive Taiwan’s economy by mending relations with the mainland. Ma’s victory followed up the KMT’s strong showing in January parliamentary elections, when it won 81 out of 113 seats. During the election campaign, the KMT pledged to ease restrictions on visits by Chinese citizens to Taiwan, restrictions prohibiting Taiwanese companies from investing more in mainland China, and restrictions on Taiwanese financial firms investing in China. The cross-strait common market endorsed by KMT Vice Presidential candidate Vincent Siew struck a cord with voters.

Taiwan has been experiencing slow growth and investment since 2000. Stagnant domestic investment and overseas outsourcing have eroded the share of manufacturing in GDP. Declining domestic demand also has caused the Taiwanese economy to rely increasingly on overseas markets. Under these circumstances, a broad consensus has emerged in Taiwan to smooth the often tense relations with China and strengthen bilateral economic cooperation.

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